Medical audit is a process by which variations from previously agreed upon standards of care are identified based on information recorded in the medical chart. Many audits, as currently performed, encompass broad medical topics of considerable complexity and tend to lack sensitivity and specificity. This study attempts to improve the process of criteria development by selection of discrete topic subsets for which definite empirical evidence is available, and by use of the logic of decision analysis and probability theory. In year one we have developed logic-based and science-based criteria for recently completed audits at Stanford University Medical Center and compared the sensitivity and specificity of audits conducted using three criteria against those conducted with conventionally developed criteria. From the results of this comparison we will develop a set of general principles for criteria setting. In the second year we will carry out field tests in a small number of community hospitals, again comparing the results of audit using logic-based and science-based criteria with the results of audit as currently practiced. These audits will be preceded by a program of education designed to demonstrate the use of such audits as an aid to better peer review and better patient care.